Direct employment 500 



Indirect employment (at 5:1 ratio) 100 



Direct plus Indirect 600 



Induced employment (at multiplier of 0.8) 480 



Total Employment 1,080 



The ratio may be stated as a multiplier so that it directly produces total 

 employment rather than induced employment. In this example, the resulting 

 multiplier would be 1.8 (600 x 1 .8 = 1,080). The final result, of course, 

 is the same. 



EXAMPLE 4. Discussion of the Induced Employment Multiplier 

 (Source: Reference 9) 



We have assumed that for every 10 direct and indirect 0CS 

 jobs to be. held by residents of the study area, there will be 

 a total of 18 jobs; thus, eight jobs will be induced. This 

 multiplier of 1.8 was derived from a study performed for the 

 U.S. Economic Development Administration (Management and Economic 

 Research, Inc., 1967). This study determined, from other available 

 studies, that a relatively large, integrated area could be assumed 

 to have an income multiplier of 1.8 while small areas generally 

 experience greater leakage of funds and can thus be assumed to have 

 a multiplier of 1.3. 



The 1.8 multiplier appears reasonable, but is low relative to 

 factors used in several other studies related to 0CS development 

 (U.S. Council on Environmental Quality, 1974; Gulf South Research 

 Institute, 1974; Goodman, 1975). The relatively lower multiplier 

 appears to more accurately reflect the incremental effects of job 

 creation within metropolitan areas. Multipliers that are derived 

 from economic base or input-output data assume that the creation of 

 additional jobs would lead to induced employment in roughly the same 

 ratio as the existing ratio of induced to basic employment in the 

 area. This characterization ignores some basic issues. First, jobs 

 inducec' by on increase in direct and indirect jobs are most often 

 a function of income and population. To the extent that direct 

 and indirect jobs will be absorbed by the existing population, the 

 ratio of additional induced to additional basic jobs would be less 

 than the existing basic- induced job ratio. . . . 



18 



